LOCK UP AGREEMENT
AGREEMENT, dated as of the 21st day of May 2001, (the "Effective Date"),
by and between Nutritional Systems, Inc., a Nevada corporation (the
"Company"), and the stockholders of the Company who have executed this
agreement (hereinafter collectively called the "Stockholders").
WHEREAS, the Company is a corporation organized and existing under the
laws of the State of Nevada, authorized to issue common stock with a par
value of $0.001 (the "Common Stock"), of which there are issued and
outstanding 11,526,554 shares, as of May 7, 2001; and
WHEREAS, the Company contemplates a Nevada Registration pursuant to NRS
90.490 (the "Registration") of its Common Stock; and
WHEREAS, in connection with the Registration the Stockholders have
agreed to lock up an aggregate of 6,726,100 shares of Common Stock, upon the
terms and conditions set forth herein.
In consideration of the mutual covenants and promises herein contained,
the parties hereto agree as follows:
1. The Stockholders and the Company hereby agree to hold in their
respective names, in accordance with the provisions hereof, certificates
representing an aggregate of 6,726,100 shares of Common Stock owned of
record by the Stockholders in the respective amounts set forth on
Exhibit A hereto (the "Lock Up Shares").
2. This Agreement shall become effective upon the date first above written
and shall continue in effect until the earlier of (i) one (1) year from
the Effective Date or (ii) in accordance with the terms hereof (the
"Termination Date"). The period of time from the Effective Date until
the Termination Date is referred to herein as the "Lock Up Period."
3. During the Lock Up Period, the Stockholders shall receive all of the
money, securities, rights or property distributed in respect of the Lock
Up Shares then held, including any such property distributed as
dividends or pursuant to any stock split, merger, recapitalization,
dissolution, or total or partial liquidation of the Company.
4. The Lock Up Shares are subject to release to the Stockholders after one
(1) year from the Effective Date of this Agreement
5. Upon the occurrence or satisfaction the condition specified in Paragraph
4 hereof, the Company shall promptly give appropriate notice to the
Company's transfer agent and present such documentation as is reasonably
required to evidence the satisfaction of such conditions.
6. The Stockholders shall have the sole power to vote the Lock Up Shares
while they are being held pursuant to this Agreement.
7. (a) Each of the Stockholders agrees that during the term of this
Agreement he will not sell, transfer, hypothecate, negotiate,
pledge, assign, encumber or otherwise dispose of any or all of the
Lock Up Shares set forth opposite his name on Exhibit A hereto,
unless any one of the conditions in Paragraph 4 have been met or
the transferee agrees to be bound by the provisions of this
Agreement. This restriction shall not be applicable to transfers
upon death, by operation of law, to family members of the
Stockholders or to any trust for the benefit of the Stockholders,
provided that such transferees agree to be bound by the provisions
of this Agreement.
(b) The Stockholders will take any action necessary or
appropriate, including the execution of any further documents or
agreements, in order to effectuate the provisions of this
Agreement.
8. Upon execution of this Agreement, the Company shall direct the transfer
gent for the Company to place stop transfer orders with respect to the Lock
Up Shares and to maintain such orders in effect until May 21, 2002.
9. Each notice, instruction or other certificate required or permitted by
the terms hereof shall be in writing and shall be communicated by
personal delivery, fax or registered or certified mail, return receipt
requested, to the parties hereto at the addresses set forth below, or at
such other address as any of them may designate by notice to each of the
others:
(i) If to the Company, to:
Nutritional Systems, Inc.
0000 Xxxx Xxxxxxxx, Xxxxx 000
Xxxxx, Xxxxxxx 00000-0000
(ii) If to the Stockholders, to their respective addresses as set
forth on Exhibit A hereto.
A copy of all communications sent to the Company or the stockholders
shall be sent by ordinary mail to the Xxxxxxxxxx Law Group, 000 Xxxx
Xxxxxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx 00000
10. Except as set forth in paragraph 11 hereof, this Agreement may not be
modified, altered or amended in any material respect or cancelled or
terminated except with the prior consent of the holders of all of the
outstanding shares of Common Stock of the Company.
11. In the event that the Registration is not consummated within one year of
the Effective Date, this Agreement shall terminate and be of no further
force and effect.
12. The Stockholders each agree that in the event they hold their common
stock in street name that they will request the transfer of the common
stock out of street name and back into the name of the individual
Stockholder.
13. This Agreement embodies and constitutes the entire understanding between
the Stockholders and the Company with respect to the subject matter
hereof, and all prior understandings, representations and statements, if
any, whether oral or written, are merged into this Agreement. Neither
this Agreement nor any provision hereof may be waived, modified,
amended, discharged or terminated except by an instrument signed by the
party against whom the enforcement of such waiver, modification,
amendment, discharge of termination is sought, and then only to the
extent set forth in such instrument.
14. In the event that any term, condition, covenant, agreement, requirement
or provision herein contained shall be held by any court to be
unenforceable, illegal, void, or contrary to public policy, such term,
condition, covenant, agreement, requirement or provision shall be of no
effect whatsoever upon the binding force or effectiveness of any of the
other terms hereof, it being the intention and declaration of the
parties hereto that had they or any of them known of such
unenforceability, illegality, invalidity or contrariety to public
policy, they would not have entered into a contract, each with the
other, containing all of the terms, conditions, covenants, agreements,
requirements and provisions hereof.
15. If at any time during the term of this Agreement any dispute,
difference, or disagreement shall arise upon or in respect of the
Agreement, and the meaning and construction hereof, every such dispute,
difference, and disagreement shall be referred to a single arbiter
agreed upon by the parties, or if no single arbiter can be agreed upon,
an arbiter or arbiters shall be selected in accordance with the rules of
the American Arbitration Association and such dispute, difference, or
disagreement shall be settled by arbitration in accordance with the then
prevailing commercial rules of the American Arbitration Association, and
judgment upon the award rendered by the arbiter may be entered in any
court having jurisdiction thereof
16. This Agreement shall be governed by and construed in accordance with the
laws of Nevada and shall be binding upon and inure to the benefit of all
parties hereto and their respective successors in interest and assigns.
17. This Agreement may be executed in several counterparts, which taken
together shall constitute a single instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers on the day and year first above
written.
Nutritional Systems, Inc.
By:/s/ Xxxxxxx Xxxxx
Xxxxxxx X. Xxxxx
STOCKHOLDERS:
/s/ Xxxxxxx Xxxxx
Xxxxxxx X. Xxxxx, (2,738,050 Shares locked up)
/s/ Xxxxxx Xxxxx
Xxxxxx X. Xxxxx, (2,738,050 Shares locked up)
/s/ Xxxxxx Xxxxxx
Xxxxxx X. Xxxxxx, (500,000 Shares locked up)
/s/ Xxxxxxx Xxxx
Xxxxxxx X. Xxxx, (750,000 Shares locked up)
EXHIBIT A STOCKHOLDERS' LIST
Name and Address
of Stockholders Stock Certificate Number of Shares
No.
Xxxxxxx X. Xxxxx 2,738,050
Xxxxxx X. Xxxxx 2,738,050
Xxxxxx X. Xxxxxx 500,000
Xxxxxxx X. Xxxx 750,000
